The Consumer Financial Protection Bureau made clear that debt collection continues to be a major focus by issuing two new bulletins and five action letters for consumers to use when responding to debt collectors. Most significantly, the bulletins not only address the conduct of debt collectors and debt buyers, but they are also directed at creditors and servicers.
This bulletin focuses on the application of the Dodd-Frank Act prohibition of “unfair, deceptive or abusive” acts or practices (UDAAPs) on debt collection. While reminding debt collectors and debt buyers subject to the Fair Debt Collection Practices Act (FDCPA) that they must also refrain from committing UDAAPs, the bulletin is primarily intended as a warning to persons collecting debts who are not subject to the FDCPA. The FDCPA generally does not apply to first-party creditors collecting their own debts or to servicers when collecting debts that were current when servicing began.
The bulletin reviews the standards the CFPB uses to determine whether conduct constitutes a UDAAP and provides examples of conduct “related to the collection of consumer debt that could, depending on the facts and circumstances, constitute UDAAPs prohibited by the Dodd-Frank Act.” The examples include various acts or practices that would likely be covered by the general FDCPA prohibitions on harassment or abuse, false or misleading representations, and unfair practices, as well as various acts or practices specifically identified in the FDCPA as conduct that violates those prohibitions.
Since the CFPB describes these examples as a “non-exhaustive list,” it would likely consider other acts or practices specifically identified in the FDCPA to be UDAAPs. Creditors who collect their own debts and servicers should review their collection practices with counsel knowledgeable about the FDCPA as well as state debt collection laws (which may track or incorporate certain FDCPA prohibitions).
The CFPB’s second bulletin targets deceptive representations made by creditors, debt buyers, and debt collectors when collecting consumer debts. (While not specifically mentioned, the bulletin would also cover representations made by servicers.) The bulletin highlights potentially deceptive representations about how paying debts can affect credit reports, credit scores, and creditworthiness. The CFPB states that “based on its supervision, enforcement, and other activities, the CFPB is aware that these types of representations are being made and is concerned that some of them may be deceptive under the FDCPA, the Dodd-Frank Act, or both.”
The CFPB notes that its examples of what might constitute such potentially deceptive representations “are illustrative and non-exhaustive.” The CFPB indicates that during examinations and enforcement investigations, it may review “communication materials, scripts, and training manuals and related documentation” to assess whether such representations are being made and their factual basis.
Consumer Action Letters and Debt Collection Complaints
The CFPB’s issuance of the bulletins was accompanied by its publication of five action letter templates that consumers can use when corresponding with debt collectors. The letters address various situations such as when a consumer wants to dispute a debt, restrict or stop all communications by the collector, or has hired a lawyer. (It appears that the CFPB’s template for consumers to request more information about a debt that they are disputing may have been based on a template used by a plaintiffs’ class action law firm.)
Also accompanying the bulletins’ issuance was the CFPB’s announcement that its consumer complaint system is now taking debt collection complaints “related to any consumer debt, including credit card debt, mortgages, auto loans, medical bills and student loans.” By inviting consumers to submit complaints about medical bills, the CFPB is likely to receive complaints about such bills regardless of whether they involve any extension of credit. (In the preamble to its debt collection “larger participant” rule, the CFPB acknowledged that the collection of medical debt is not a “consumer financial product or service” under the Dodd-Frank Act unless it involves an extension of credit.)
When a consumer files a complaint against a collector who is not the original creditor, the CFPB's website portal also allows the consumer to send a separate complaint to the original creditor. This means creditors might be required to respond to complaints about debt buyers, who do not act as service providers and for whom creditors should not be responsible. This reflects a misguided view by the CFPB that there is no difference between debt buyers and debt collectors, and creditors can be responsible for violations of law committed by both types of entities. This underscores the need for creditors to review and potentially revise their debt sales agreements and conduct heightened due diligence on debt buyers.
The bulletins and other CFPB actions serve as a reminder of the expansive reach of the CFPB’s supervisory authority in the debt collection arena. Under its “larger participant” rule, the CFPB can supervise debt collectors and debt buyers with more than $10 million in annual receipts. The Dodd-Frank Act gave the CFPB supervisory authority over service providers to large insured depository institutions as well as service providers to nonbank mortgage originators, payday lenders, and private student loan lenders. Those service providers can include third-party debt collectors, regardless of the collector’s size.
The CFPB can also supervise mortgage servicers and servicing by large banks, and it has proposed to supervise nonbank servicers of private and federal student loans as “larger participants.”